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Real estate: Most mortgage holders require escrow

Dear Edith: You discussed escrow in a recent column but you didn’t say if I can talk my bank into letting me get out of it. Do you have any advice?

— P.I., Pittsford

If you didn’t keep up your fire insurance premiums and the building burned down, you’d be left with just the value of the lot. If you didn’t pay your property taxes, the real estate might be seized and auctioned off for back taxes. Either way, your mortgage lender could be left with little or nothing as security for an unpaid mortgage loan. That’s why your lender wants to be sure insurance premiums and taxes are paid, and paid on time.

Many –— perhaps most — mortgage plans let your lender collect payment for those expenses month by month. You send in one check, to cover PITI. That stands for Principal (something toward reducing the debt), Interest (the past month’s Interest on the remaining debt), and then one-twelfth of your property Tax and homeowners Insurance costs. Your lender will accumulate the extra money, eventually receiving your tax and insurance bills and paying them for you.

In the meantime the money is in limbo. It really belongs to you, even though you can’t touch it. The lender is just holding it “in escrow.” You should receive regular accounting and in some states, including New York, interest while the money is being accumulated.

Your existing mortgage plan evidently requires those monthly escrow payments, sometimes called reserves. You probably have an FHA or VA loan, or a conventional mortgage that didn’t require a big down payment. By now your debt may have been gathered into a package with similar ones and sold to investors on what is known as the secondary market. You can always read your mortgage document’s fine print to see if there are any circumstances under which you could stop paying escrow and take over your own bills, but I don’t think you’ll have much luck.

This next reader has a mortgage that doesn’t require that monthly collection of escrow funds. He probably investigated the matter before he chose his mortgage plan, and he may have presented an impressive credit rating.

Airline points

Dear Edith: Another advantage for getting out of escrow accounts:

One advantage for me is that I can pay my homeowners insurance and real property taxes by credit card. I gain airline mileage points by using the credit card vs paying by check or an escrow account, and that adds several thousand miles each year.

— S., Greece

OK — though here’s a twist: Occasionally homeowners in some states find that interest rates on escrow accounts were set by law years ago when rates were higher, and it’s more interest than they could currently get on savings accounts.

Dear Edith: Your advice on timeshares is outdated by suggesting people put an ad in a newspaper. If people are interested in selling or giving away their timeshare they should join the Timeshare Users Group (tug2.net) for a cost of $15/year with free classified advertising. The group has a classified section for Bargain Basement timeshares. Spending $15/year to reach a worldwide audience is far better and cheaper than putting an ad in a local paper.

TUG has a very active group of users and may have additional suggestions for timeshare owners. TUG has been quoted in national magazines as an authority for timeshares.
— to askedith.com

If my newspaper advice is outdated, it’s because I am too. Here’s how far back I go — on June 6, 1944, I was already a full-time reporter, sent out to cover my town’s reaction to long-awaited D-Day, the American invasion of Europe (sunny day, all the church doors wide open, people sitting inside motionless, silence.)

I still think a classified ad in an old-fashioned newspaper might catch the eye of a tourist passing through the resort town where that unwanted timeshare is located. And there are still older folks who don’t have the habit of researching on the Internet.

At any rate, I was pretty sure someone would respond with information about your group. Thanks for writing.

Contract problem

Dear Edith: I am buying a house on a land contract, six years so far and nine to go. The man I’m buying it from is in hospice. Where do I send my payments, and what if he dies?

— H.W., Gates

Your contract would remain just as it is, with the estate, or taken over by an heir. Keep sending your normal payments to the same address until you are otherwise instructed. Give it a few months and if you don’t feel secure about the matter then, ask an attorney to investigate just whom you should be dealing with.

Edith Lank will respond personally to any question mailed to 240 Hemingway Drive, Rochester NY 14620; e-mailed to edithlank@aol.com; or posted at askedith.com.